Principles governing the cost control of dispute resolution and claim settlement involving experts

OVERVIEW

The total cost of dispute resolution or claim settlement includes the cost of an expert’s services.  Incorporating these costs into a party’s total costs is essential to good management.  It helps to have some understanding of the nature and methods of expert investigation and how these costs develop - to know something about the services you’re buying.

Principles are needed to guide a party managing these costs.  I concluded this after noticing that experts were sometimes retained months after a dispute arose or a claim made, occasionally years after. 

I also noticed that an investigation was sometimes stopped when the cost of the expert’s services exceeded the budget set by the party involved – a budget with a technical component set by a non-technical person.  I couldn’t help but wonder if the dispute resolution or claim settlement was sometimes compromised as a result.

I identified the following seven (7) principles to help the parties to a dispute or claim manage their costs. There is a comment on each.  I say identified  because the principles have always existed but sometimes overlooked.

PRINCIPLES 1, 2 and 3 are fundamental.to cost management.  You can’t go wrong if you follow these three.

(There are also good reads in the References as cited in the Comments)

I think of a party as one or more of the following:

  1. Counsel, advocates
  2. Insurers
  3. Insurance claim managers and consultants
  4. Insurance claim adjusters
  5. Property owners
  6. Architects, engineers and builders
  7. Victims of accidents in the built environment
  8. Injured parties in general, for whatever reason

***

For a long time in the Atlantic provinces, expert witnesses have played an important role in civil litigation, dispute resolution and claim settlement processes.  You don’t hear about the majority of these because they involve small or medium-sized loses, failures and accidents in the built environment.  They’re not catastrophic and newsworthy.  Many are also less affluent. (Ref. 1)  But, affluent or not, they all require an expert to be thorough and reliable even when investigating just one, small technical issue.

It’s difficult to be thorough when you’re retained late in the process and impossible when your work is stopped mid-investigation.

A timely and reliable estimate of an expert’s costs, based on the forensic work he must do, is essential to good management – with informed input from the expert.  This is the case in civil litigation, for example, regardless of whether the file is taken on a fee or a contingency basis.

How serious is the omission?  Less than good management results when the expert’s invoices start to come in threatening the budget that the expert had no part in setting, and the expert’s services are suddenly stopped.

For example, I’m certain in one claim involving the disputed height of a feature in the landscape, to the detriment of any damages entitled the injured party.  A height disputed back and forth and up and down by three opposing parties with no good evidence, yet a height easily got by an expert with simple, high school math.  And in another involving a slip and fall accident that forced the injured party to change firms.  And in still another when a case settled four months after an expert was retained – 11 years after the case was taken.

Somewhat related, a confidential survey of remediation contractors for the National Research Council found that contaminated site remediation was costing more than it should, in many cases much more, for want of an expert. (Ref. 2)

It doesn’t have to be like this.  There’s enough guidance out there now to help a claim consultant or adjuster manage a claim or counsel manage the cost of civil litigation involving experts. (Ref. 3)  Guidance that allows the expert to do his work properly and serve the dispute resolution process well.

This can be done while ensuring, as required by common law, that experts: (Ref. 4):

  1. Be independent from the parties who retain them;
  2. Provide objective, unbiased opinion evidence in relation only to matters within their expertise; and
  3. Avoid assuming the role of advocates for the parties that retain them.

These requirements of experts are similar in all issues involving dispute resolution and claim settlement.

I realized that while there’s guidance in the literature, it needs to see the light of day.

I knew about the Principles Governing Communications With Testifying Experts. (Ref. 1) I identified the following Principles Governing the Cost Control of Dispute Resolution and Claim Settlement Involving Experts (the “Principles”) patterned on this document.  My Principles are intended to provide guidance in a similar way.

How did I identify The Principles?  For certain i was guided by the Principles Governing Communications with Testifying Experts.  But I also had insight from practicing forensic civil engineering in the Atlantic provinces since the late 1980s and blogging on the nature and methods of forensic engineering since 2012 – including about 18 blogs on the cost of civil litigation involving experts. (Ref. 5)

Prior to my forensic work, I practiced civil engineering, specializing in geotechnical and foundation work, and often enough also site environmental assessment and remediation.  I worked in eastern, western and northern Canada, off-shore Nova Scotia, and in the Caribbean, the U.K. and Australia.

Prior to engineering, I studied land surveying and practiced on Prince Edward  Island.

In addition, drafts of the Principles were read by colleagues in engineering and friends in law.  All offered good comments.  Those by a lawyer and a town planner were particularly helpful.  I’ll update the Principles based on additional comments by readers.

The Principles are not intended to address the cost of all disputes and claims but to provide some guidance on managing those involving experts. The Principles focus on:

  1. Early retention of an expert,
  2. Frequent conferring with the expert
  3. The estimated scope of an expert’s services and costs
  4. The experts’s greater qualification for assessing technical costs
  5. Incorporating the expert’s costs into the resolution process early.
  6. Frequent updating of cost as evidence comes in
  7. The shock of the financial realities in dispute resolution

As with the Principles Governing Communications with Testifying Experts, the hope is that by adhering to the following Principles, parties to a dispute or claim will fulfill their duties to their clients and customers at a well managed cost without compromising the work of experts.

The PRINCIPLES

PRINCIPLE 1

A party should consult early with an expert about the cost of investigating a dispute, an insurance claim, a failure in the built environment or an accident.  In the case of civil litigation, preferably before the case is taken during the merit-assessment stage.

Comment

The emphasis in Principle 1 is on “consult early”.  This can’t be emphasized too much.  Too many cases are taken and disputes go forward only to find months or years after the fact – when an expert is finally consulted – that more investigation is needed than there is budget.

Managing the cost of an issue starts with an initial cost estimate, and the technical component of the cost can only be estimated by an expert.  Expert consultation at an early stage costs money but very little compared to the cost of a technically weak dispute or insurance claim found out too late.

Properly managing cost starts by identifying the different expenses contributing to the cost.  When one of the expenses is a personal service like an expert, engaging with the expert early is good management.

PRINCIPLE 2

A party should recognize that the expert is the person best qualified to estimate the cost of his or her services based on their assessment of the scope of an investigation.

Comment

The cost of an expert’s services can only be estimated by the expert and only after he or she has estimated the scope of their work by doing such things as:

  1. Taken a briefing by the party on the matter,
  2. Reviewed available documentation,
  3. Visually examined the site,
  4. Identified the technical issues in the matter.

Emphasis must be placed on estimated because not even the expert knows where his investigation will lead if he follows the evidence.

It helps if a party confers with the expert and gains some understanding of the investigative process and how cost develops.  This in a manner similar to how an expert is expected to have an understanding of the judicial process in a civil litigation matter.

PRINCIPLE 3 

A party should confer often with the expert during the investigation and get frequent cost-to-date and estimated cost-to-complete at key stages during the forensic investigation.  Add these to the cost-to-date and cost-to-complete the entire process to get up-to-date total costs.  

Comment

This is a key and ongoing task in the cost control of civil litigation, for example, and in dispute and claim resolution in general.

Conform to this principle and you’ve got hard data for controlling your costs.

The scope of an investigation may change and be greater or less than initially assessed.  The importance of some conventional tasks may fade while unexpected follow-up tasks may need to be considered – as in follow-the-evidence.

Care must be taken with undue focus on a budget.  There’s no question one needs to be set but it must not be perceived as a fixed price for which an expert agrees to do all that is necessary.

In civil litigation, for example, counsel and expert must each have some understanding of the other’s role to make it work.  Key stages in both the legal process and the forensic process are well known.

Also well known in the well developed field of project management is that cost-to-complete a project is very approximate at the beginning, gets better as a project goes to completion and is quite accurate towards the end.  This applies to all dispute and claim resolution involving experts.

It doesn’t help, of course, that we have situations where estimating the cost to investigate a catastrophic failure or a terrible accident is not always difficult, nor estimating the cost to investigate a simple failure always easy.  (Ref. 6)

It helps to learn why it’s difficult for an expert to identify and estimate the cost of all the various tasks in a forensic investigation.  It varies from easy to difficult, to very difficult, to impossible. (Ref. 7)

It’s important for a party to have a plan for managing the cost of investigating the technical issues.  For “taking the measure” of the dispute resolution or claim settlement and expert costs at key stages in the process.  This in the spirit of, “If you can measure it you can manage it” that’s cast-in-stone in engineering. (Ref. 8)  Such a plan is reflected in Principle 3. 

PRINCIPLE 4 

A party to a dispute involving experts must recognize that he is managing a potentially expensive process.

Comment

Remember in civil litigation, for example, that “…most clients are unfamiliar with the technical and procedural aspects of litigation.  They are also unfamiliar, and shocked, by the financial realities”. (Ref. 4)

“It’s necessary to fully explain the “facts of life” at an early stage using a delicate touch so that the client does not become completely discouraged from enforcing his rights.” (Ref. 4)

I believe David Stockwell’s comment speaks in part to the fact that the cost of civil litigation, and all dispute and claim resolution, including that involving experts, can be controlled but only to a limited extent – part of the financial realities.

“A lawyer just doesn’t walk into court – a lot of preparation is necessary beforehand”.  (Ref. 9)  Similarly, an expert just doesn’t write a report and render an opinion – a lot of investigation is sometimes necessary beforehand.  Some cases don’t go forward  properly until the expert’s work is done, and some don’t go forward at all.

PRINCIPLE 5 

Counsel can manage costs better by retaining an expert according to the needs of the case, basically as a consulting expert or a testifying expert.

Comment

Rules governing experts are resulting in more out-of-court resolution of disputes.  As a result experts will be increasingly retained as consulting experts.  There are different ways this can be done with different costs. (Ref. 10)

There’s a big difference in expert costs between a case where you retain an expert to simply peer review the work of another and report verbally.  To one where an expert does a detailed forensic investigation, collects and analyses data, draws conclusions, formulates an opinion and writes and submits a report compliant with the Rules.

There are differences between the cost of a verbal report and a written report at any stage of an investigative.  There are also differences between a factual report when the expert gives the data only, and an interpretative report when the expert analyses the data and gives the analysis as well.

The “hot tub” method of resolving differences between expert’s findings and opinions is another cost effective way of working with consulting experts. (Ref.11)  Experts for the different parties in a dispute or claim meet with their different reports, discuss these and agree a single report on the matter.

PRINCIPLE 6 

A party should confer with the expert to understand the technical issues and help identify the key one(s) that must be investigated.

Comment

Start this process – it could be ongoing as investigative data comes in and the technical issues change - as soon as the expert has been briefed on the dispute and had a chance to assess an initial scope of investigation.  There will be good control of an expert’s costs if only one or two technical issues must be investigated compared to several.

In the case of civil litigation, cost is well managed when an expert has some understanding of the judicial process and counsel is similarly informed about the forensic investigative process, and they talk often about the relevant technical issues.  This understanding serves all the Principles well.

PRINCIPLE 7

Beware the tyranny of the bottom line – the effect of undue focus on the worth of the file to the firm on the thoroughness, reliability and objectivity of an expert’s work and also on any damages due the injured party. (Ref. 12)

Comment

A firm must make money else there won’t be someone there to represent the interests of the injured party.  But care must be taken that a balance is struck that is consistent with good practice and the appropriate interests of the injured party.

References

  1. The Advocates Society, Principles Governing Communications With Testifying Experts, Ontario June 2014
  2. Jorden, Eric E., How to Reduce Oil Spill Damage Claims; Early Study Results, Atlantic Claims Journal, The Official Journal of the Insurance Claims Association of Nova Scotia, November 12, Winter 2002
  3. Kerzner, PhD, Harold, Project Management; a Systems Approach to Planning, Scheduling and Controlling, 8th ed, 2003, John Wiley and Sons, Inc., Hoboken, New Jersey
  4. Stockwood, Q.C., David, Civil Litigation, A Practical Handbook, 5th ed, 2004, Thompson Carswell
  5. A Bundle of Blogs: How to Manage the Cost of Civil Litigation Involving Experts.  Posted August 31, 2017
  6. (Fairly easy) estimating the investigative cost of a catastrophic engineering failure. Posted August 13, 2013
  7. Difficulty estimating the cost of forensic engineering investigation.  Posted July 23, 2013
  8. “If you measure it you can manage it” – and do thorough forensic engineering, and cost effective civil litigation.  Posted June 18, 2015
  9. “A rose by any other name …”, Primers for lawyers.  Posted December 19, 2016 (Note comment by Ron Rizzo, Pink Larkin, Lawyers, Halifax)
  10. How to retain an expert in a cost effective way.  Posted November  30, 2018
  11. “Hot tubing” experts reduce the cost of civil litigation and ensure objectivity.  Posted March 31, 2018
  12. Professional ethics and the tyranny of the bottom line.  Posted October 11, 2012

 

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